WSJ Sticks A Fork In Ad Networks

Everyone covering online advertising has a favorite new stat, and it was quoted again in today's Wall Street Journal: "More than 300 online-ad networks have cropped up over the past couple of years, making the business of brokering ads on the Web one of the most popular -- and crowded -- niches on the Internet." Razorfish exec Jeff Lanctot quoted the same figure last week when he said "dozens and dozens" of ad nets would die in 2009.

But today's Journal article seemed to ask: why wait until then? The doom and gloom, bullet-pointed:

JellyCloud, a Redwood City, Calif.-based targeted ad network, closed its doors this month after raising $11.5 million in venture-capital funding earlier this year.

Adzilla, a similar network in San Francisco, also ceased operations.

San Francisco-based AdBrite, which was founded in 2002 by Internet entrepreneurs Philip Kaplan and Gidon Wise and has raised a total of $35 million in funding, recently cut 40% of its work force to make itself profitable.

Ad networks like Burst Media, the 17th-largest by unique visitors, and Collective Media, the 16th largest, say they are both seeking buyers.

Other ad networks "are in severe trouble and could be closing their doors in the back half of this year or the beginning of '09. People are bracing for the worst," says Ross Sandler, an Internet analyst at RBC Capital Market

Mr. Sandler at RBC Capital also recently cut his estimates for ValueClick -- operator of the country's fifth-largest ad network, as measured by unique visitors. The analysts warned investors to brace for declines of nearly 2% for the full year 2008 and as much as 7% in 2009 in the company's ad-network business. ValueClick is expected to report third-quarter results Wednesday.